Grameen’s loan disbursement, recovery rates fall

The rate of loan disbursement and recovery by the Grameen Bank fell in 2011 due to sluggishness in its activities, ostensibly caused by a long drawn out row between the government and the bank over its management. Available data of the Grameen Bank, sent recently to the finance ministry by its incumbent management, showed that Tk 1,239.03 crore was disbursed in 2011, compared to Tk 1,730 crore in 2009 and Tk 1,674 crore in 2010.
The loan recovery rate of the Nobel Peace prize winning micro-credit pioneering institution fell to 96.75 per cent last year, one of most turbulent years for the bank after the forced exit of its founder and managing
director, Dr Muhammad Yunus.
This year’s loan recovery rate is one of the lowest in nearly three decades of the bank’s history that made collateral-free small loans available to millions of poor people, especially women.
The bank had an outstanding record of loan recovery of more than 98 per cent on average before the brawl between the government and Yunus.
The bank’s lacklustre performance is contrary to statements of finance minister AMA Muhith who had claimed more than once that the management of the bank was on the right track. Mirza Azizul Islam, former finance adviser to the caretaker government, observed that the declining performance of the bank was not surprising as its officials are anxious about the future of the bank.
He said that out of two indicators, the falling rate of loan disbursement is most worrying.
Another former adviser of the caretaker government, Akbar Ali Khan, fears that the bank’s position will be jeopardized further if the government’s ‘interference’ is not stopped.
The Bangladesh Bank’s former governor, Farash Uddin, said that the government is not interfering at all with the bank. He said that 30 per cent of the bank was owned by the government when it was established.
The government should first ascertain why the percentage of its share has dropped to three per cent as claimed by Grameen officials.
Muhammad Yunus founded the bank in 1983 and won the Nobel Peace prize in 2006 for institutionalising micro-credit financing as a tool to alleviate poverty. He was relieved of the post of managing director by an order of the Bangladesh Bank in 2010, at the instigation of the prime minister many believe.
BB’s order was challenged in the Supreme Court by Yunus, but the court upheld BB’s decision.
The loan recovery rate — one of the main indicators of any financial entity — of the Grameen Bank has been hovering over 98 per cent since 2002 before it slipped down to 96.55 per cent in 2009.
The bank improved its loan recovery rate by almost one percentage point in 2010 before a ‘series of interferences’, the last one of which is amendment of the Grameen Bank Ordinance to give more power to the chairman in appointing the managing director.
Before the proposed amendment, the decision of appointment of the managing director was taken by the bank’s board of directors, dominated by the banks’ borrowers.
Nine out of 12 directors are picked from the borrowers while the government selects three directors, including the bank’s chairman.
Grameen Bank’s women leaders and professionals have expressed deep concern over the government’s actions, saying that the government was out to ‘grab the bank of the poor’.
The government owns a mere 3% of the bank, but the proposed amendment will enable the chairman, appointed by the government, to select the MD of the bank, they said in a recent statement.
On August 2, the government approved the draft of the Grameen Bank Ordinance 2012 (Amendment), which has the provision of giving more authority to the chairman, and therefore the government, in appointing the managing director.
Expressing deep concern, Yunus said, ‘I have become very anxious at seeing the poor being deprived of the ownership of their bank. I am so worried that I am unable to express my emotions.’
The US government has expressed its concern at the government’s move to curtail the power of Grameen Bank’s borrowers in the selection of the managing director.
The US ambassador in Dhaka, Dan Mozena, expressed America’s concern at a meeting with Muhith in the latter’s secretariat office on Monday.
Mozena told reporters after the meeting that the US wanted Grameen Bank to have a strong managerial board which would be selected by the bank’s borrowers.

-With New Age input

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